Taxing pot

Backers of a ballot issue to tax recreational marijuana clearly know something about addiction. For while marijuana itself is not addictive, tax revenue certainly is. And if they can get the state hooked on money from pot sales, they will have effectively enlisted a powerful partner.

It is a smart strategy, one that should work.

Of course, it also has some good arguments to support it. Chief among them is the simple proposition that taxes on marijuana should pay for the regulations, inspectors and regulatory enforcement that almost everyone agrees should accompany legalization. That it would generate quite a bit of money for schools is good, too.

Proposition AA, which will be on the November ballot, would impose a 15 percent wholesale excise tax and a 10 percent retail sales tax on marijuana. The excise tax was part of the language of Amendment 64, which the voters approved last November. That vote made it legal for individuals at least 21 years old to possess up to 1 ounce of marijuana or as many as six marijuana plants for personal use. It also allowed commercial sale of marijuana beginning as early as this year.

Amendment 64 did allow cities to prohibit commercial sales. And it specifically bans the use of marijuana “openly or publicly.”

Another part of Amendment 64 is the provision that the first $40 million per year generated by the excise tax would go to schools. But models showed that the excise tax may not actually generate $40 million, which would leave nothing left over to cover the cost of regulating marijuana and the associated enforcement.

As a result, in Proposition AA the Legislature added the sales tax to cover those expenses. It also included a provision allowing the Legislature to raise that tax to as high as 15 percent.

That is all good. The whole thrust of last year’s vote was that marijuana should be treated like alcohol – highly taxed, heavily regulated and reserved for those older than 21. In that, Proposition AA is only codifying the voters expressed wishes and should be approved.

The political side of it, however, remains the most interesting. And not surprisingly, considering the nature of modern politics, that can be seen in the money.

Assume for the moment that the excise tax yields that $40 million for schools, but no more. That would require wholesale pot sales of more than $266 million. Assume further that the excise tax is passed on in the retail price – why would it be otherwise? – and retail sales would top $300 million. A 10 percent sales tax would generate more than $30 million.

That is a total of $70 million to the state, presumably every year from here on out. And once the regulatory structure was in place, it would most likely run smoothly and efficiently, just as it does with alcohol. (Is it a coincidence that marijuana will be regulated by the Department of Revenue, as alcohol already is?)

With $70 million – or even half that – painlessly coming into the state’s coffers every year, what future Legislature is going to vote to ban pot? Remember how the Durango City Council exhibited symptoms of withdrawal last year when city voters nixed a minor utilities tax? If this works as planned, state government will soon be hooked on revenue from marijuana sales – and loath to give it up.

Again, the voters legalized marijuana last year. That already happened. And with that it only makes sense to regulate and tax pot like alcohol.

But make no mistake. As a state, we are about to become partners in the marijuana trade.